<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 16, 1999.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
COMMISSION FILE NUMBER 333-71305-03
USANI LLC
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 59-3490970
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
152 WEST 57TH STREET
NEW YORK, NEW YORK
(Address of principal executive offices)
10019
(Zip Code)
(212) 314-7300
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ___
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
USANI LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
- ----------------------------------------------------------------------------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
<CAPTION>
(In thousands)
<S> <C> <C> <C> <C>
NET REVENUES
Networks and television production............ $316,612 $309,841 $ 648,365 $476,003
Electronic retailing.......................... 285,122 266,224 560,905 508,420
Internet services............................. 6,544 4,720 12,851 8,533
Other......................................... 2,836 3,627 6,882 6,815
-------- -------- ---------- --------
Total net revenues......................... 611,114 584,412 1,229,003 999,771
-------- -------- ---------- --------
Operating costs and expenses:
Cost of sales................................. 182,586 167,300 358,672 319,580
Program costs................................. 149,280 167,661 319,347 257,799
Selling and marketing......................... 73,107 69,636 135,738 125,231
General and administrative.................... 57,760 44,323 113,796 77,884
Other operating costs......................... 22,190 23,125 44,319 42,851
Amortization of cable distribution fees....... 6,186 4,954 12,276 10,564
Depreciation and amortization................. 43,555 40,658 86,562 68,251
-------- -------- ---------- --------
Total operating costs and expenses......... 534,664 517,657 1,070,710 902,160
-------- -------- ---------- --------
Operating profit........................... 76,450 66,755 158,293 97,611
Other income (expense):
Interest income............................... 8,708 3,496 19,323 5,422
Interest expense.............................. (20,241) (34,995) (40,619) (53,201)
Gain on sale of securities.................... 2,970 -- 50,270 --
Other, net.................................... (7,958) (7,047) 1,658 (12,720)
-------- -------- ---------- --------
(16,521) (38,546) 30,632 (60,499)
-------- -------- ---------- --------
Earnings before income taxes and minority
interest................................... 59,929 28,209 188,925 37,112
Income tax expense............................ (1,255) (1,263) (3,138) (3,908)
Minority interest............................. 191 759 377 759
-------- -------- ---------- --------
NET EARNINGS.................................... $ 58,865 $ 27,705 $ 186,164 $ 33,963
======== ======== ========== ========
</TABLE>
The accompanying notes are an integral part of these statements.
1
2
<PAGE> 3
2
USANI LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
JUNE 30, DECEMBER 31,
ASSETS 1999 1998
<S> <C> <C>
- -----------------------------------------------------------------------------------------
<CAPTION>
(In thousands)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................... $ 13,658 $ 234,903
Accounts and notes receivable, net of allowance of $29,587
and $20,572, respectively................................. 324,448 317,298
Inventories, net............................................ 365,240 411,727
Investment held for sale.................................... 49,273 --
Other current assets, net................................... 17,857 14,685
---------- ----------
Total current assets.............................. 770,476 978,613
PROPERTY, PLANT AND EQUIPMENT
Computer and broadcast equipment............................ 98,533 95,013
Buildings and leasehold improvements........................ 55,484 55,136
Furniture and other equipment............................... 40,935 30,068
---------- ----------
194,952 180,217
Less accumulated depreciation and amortization............ (59,508) (43,262)
---------- ----------
135,444 136,955
Land........................................................ 10,242 10,242
Projects in progress........................................ 25,231 14,587
---------- ----------
170,917 161,784
OTHER ASSETS
Intangible assets, net...................................... 5,239,646 5,307,517
Cable distribution fees, net ($38,478 and $39,650,
respectively, to related parties)......................... 100,886 100,416
Long-term investments....................................... 48,574 65,327
Notes and accounts receivable, net of current portion
($1,980 and $3,356, respectively, from related parties)... 26,111 41,508
Inventories, net............................................ 140,109 150,293
Advances to USAi and subsidiaries........................... 536,689 158,152
Deferred charges and other, net ($4,673 and $4,357,
respectively, from related parties)....................... 39,822 39,075
---------- ----------
$7,073,230 $7,002,685
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
USANI LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
JUNE 30, DECEMBER 31,
LIABILITIES AND MEMBERS' EQUITY 1999 1998
<S> <C> <C>
- ----------------------------------------------------------------------------------------
<CAPTION>
(In thousands)
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term obligations................. $ 40,825 $ 28,223
Accounts payable, trade..................................... 117,796 159,288
Obligations for program rights and film costs............... 218,531 184,074
Cable distribution fees payable ($18,663 and $18,633,
respectively, to related parties)......................... 27,782 44,588
Deferred revenue............................................ 41,847 30,813
Other accrued liabilities................................... 234,724 248,271
---------- ----------
Total current liabilities......................... 681,505 695,257
LONG-TERM OBLIGATIONS, net of current....................... 707,951 732,307
OBLIGATIONS FOR PROGRAM RIGHTS AND FILM COSTS, net of
current................................................... 339,547 409,716
OTHER LONG-TERM LIABILITIES................................. 51,765 49,857
MINORITY INTEREST........................................... 757 143
MEMBERS' EQUITY
Class A (117,265,766 and 113,778,742, respectively)
shares.................................................... 1,771,412 1,753,618
Class B (133,689,889) shares................................ 2,736,363 2,736,363
Class C (22,887,354) shares................................. 466,252 466,252
Retained earnings........................................... 275,454 142,045
Unrealized gain in available for sale securities............ 42,667 17,850
Unearned compensation....................................... (443) (723)
---------- ----------
Total members' equity............................. 5,291,705 5,115,405
---------- ----------
$7,073,230 $7,002,685
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 5
USANI LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
LLC LLC LLC RETAINED UNREALIZED UNEARNED
TOTAL SHARES SHARES SHARES EARNINGS GAINS COMPENSATION
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1999............... $5,115,405 $1,753,618 $2,736,363 $466,252 $142,045 $17,850 $ (723)
Comprehensive income:
Net earnings for the six months ended
June 30, 1999........................ 186,164 -- -- -- 186,164 -- --
Increase in unrealized gains in
available for sale securities........ 24,817 -- -- -- -- 24,817 --
----------
Comprehensive income............. 210,981
----------
Issuance of LLC shares................... 22,732 22,732 -- -- -- -- --
Repurchase of LLC shares................. (4,938) (4,938) -- -- -- -- --
Mandatory tax distribution to LLC
partners............................... (52,755) -- -- -- (52,755) -- --
Cancellation of employee equity
program................................ 280 -- -- -- -- -- 280
---------- ---------- ---------- -------- -------- ------- -------
BALANCE AT JUNE 30, 1999................. $5,291,705 $1,771,412 $2,736,363 $466,252 $275,454 $42,667 $ (443)
========== ========== ========== ======== ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 6
USANI LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
- -------------------------------------------------------------------------------------
1999 1998
- -------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net earnings................................................ $186,164 $ 33,963
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization............................. 86,562 68,251
Amortization of cable distribution fees................... 12,276 10,564
Amortization of program rights and film costs............. 261,252 226,998
Gain on sale of securities................................ (50,270) --
Minority interest......................................... (377) (759)
Changes in current assets and liabilities:
Accounts receivable..................................... 3,108 (46,673)
Inventories............................................. (2,177) (15,103)
Accounts payable........................................ (41,286) 53,292
Accrued liabilities..................................... (257) 43,363
Payment for program rights and film costs................. (255,335) (233,742)
Increase in cable distribution fees....................... (12,746) (1,140)
Other, net................................................ 7,387 (24,130)
-------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES........... 194,301 114,884
-------- ---------
Cash flows from investing activities:
Acquisition of Universal Transaction, net of cash
acquired................................................ -- (1,297,233)
Acquisitions, net of cash acquired........................ (7,500) --
Capital expenditures, net................................. (28,862) (14,660)
Increase in long-term investments......................... (12,150) (7,178)
Proceeds from long-term notes receivable.................. 3,691 --
Proceeds from sale of securities.......................... 61,080 --
Other, net................................................ 2,163 (20,855)
-------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES.......................................... 18,422 (1,339,926)
-------- ---------
Cash flows from financing activities:
Borrowings................................................ -- 1,741,380
Principal payments on long-term obligations............... (13,942) (629,822)
Payment of mandatory tax distribution to LLC partners..... (52,755) --
Proceeds from issuance of LLC Shares...................... 22,732 402,454
Repurchase of LLC shares.................................. (4,938) --
Intercompany.............................................. (385,065) (273,316)
-------- ---------
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES.......................................... (433,968) 1,240,696
-------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... (221,245) 15,654
Cash and cash equivalents at beginning of period............ 234,903 23,022
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 13,658 $ 38,676
======== =========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 7
USANI LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 -- ORGANIZATION AND BASIS OF PRESENTATION
COMPANY FORMATION
USANi LLC (the "Company" or "LLC"), a Delaware limited liability company,
was formed on February 12, 1998 and is a subsidiary of Home Shopping Network,
Inc. ("Home Shopping"), which is a subsidiary of USA Networks, Inc. ("USAi"),
formerly known as HSN, Inc. At its formation, USAi and Home Shopping contributed
substantially all of the operating assets and liabilities of Home Shopping to
the Company in exchange for Class A shares in the Company.
On February 12, 1998, USAi acquired USA Networks, a New York general
partnership, consisting of cable television networks, USA Network and The Sci-Fi
Channel ("Networks"), as well as the domestic television production and
distribution businesses of Universal Studios ("Studios USA") from Universal
Studios, Inc. ("Universal"), an entity controlled by The Seagram Company Ltd.
("Seagram") and contributed those businesses to the Company (the "Universal
Transaction").
COMPANY BUSINESS
The Company is a holding company, the subsidiaries of which are engaged in
diversified media and electronic commerce businesses.
As of June 30, 1999, the Company engages in three principal areas of
business:
- NETWORKS AND TELEVISION PRODUCTION, which includes Networks and Studios
USA. Networks operates the USA Network and The Sci-Fi Channel cable
networks and Studios USA produces and distributes television programming.
- ELECTRONIC RETAILING, consisting primarily of the Home Shopping Network
and America's Store, which are engaged in the electronic retailing
business.
- INTERNET SERVICES, which represents the Company's on-line retailing
networks business.
BASIS OF PRESENTATION
The contribution of assets by USAi and Home Shopping to the Company was
accounted for in the accompanying consolidated financial statements in a manner
similar to the pooling-of-interests for business combinations due to the common
ownership of Home Shopping and USANi LLC. Accordingly, the assets and
liabilities were transferred to the LLC at Home Shopping's historical cost.
Given that equity interests in limited liability companies are not in the
form of common stock, earnings per share data is not presented.
The interim Condensed Consolidated Financial Statements and Notes thereto
of the Company are unaudited and should be read in conjunction with the audited
Consolidated Financial Statements and Notes thereto for the year ended December
31, 1998 contained in the Form S-4 Registration Statement (File No. 333-71305)
for the $500.0 million 6 3/4% Senior Notes.
In the opinion of the Company, all adjustments necessary for a fair
presentation of such Condensed Consolidated Financial Statements have been
included. Such adjustments consist of normal recurring items. Interim results
are not necessarily indicative of results for a full year. The interim Condensed
Consolidated Financial Statements and Notes thereto are presented as permitted
by the Securities and Exchange Commission and do not contain certain information
included in the Company's audited Consolidated Financial Statements and Notes
thereto.
7
<PAGE> 8
USANI LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
See the Company's Form S-4 Registration Statement (File No. 333-71305) for
the fiscal year ended December 31, 1998 for a summary of all significant
accounting policies.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
footnotes thereto. Actual results could differ from those estimates.
Significant estimates underlying the accompanying consolidated financial
statements and notes include the inventory carrying adjustment, program rights
and film cost amortization, sales return accrual and other revenue allowance,
allowances for doubtful accounts, recoverability of intangibles and other
long-lived assets, management's forecast of anticipated revenues from the
distribution of television product in order to evaluate the ultimate
recoverability of film inventory and amortization of program usage.
NOTE 3 -- BUSINESS ACQUISITIONS
UNIVERSAL TRANSACTION
In connection with the Universal Transaction, USAi paid Universal
approximately $4.1 billion in the form of a cash payment of approximately $1.6
billion, a portion of which ($300 million plus interest) was deferred until no
later than June 30, 1998, and an effective 45.8% interest in USAi through shares
of common stock, par value $.01 per share, of USAi (the "Common Stock") and
Class B common stock, par value $.01 per share, of USAi (the "Class B Common
Stock"), and shares ("LLC Shares") of a newly formed limited liability company
("USANi LLC") which are exchangeable (subject to regulatory restrictions) into
shares of Common Stock and Class B Common Stock. At the closing of the Universal
Transaction, USAi contributed its Home Shopping business to USANi LLC, a
subsidiary of USAi. Simultaneously with this transaction, the remaining
1,178,322 shares of Class B Common Stock were issued in accordance with Liberty
Media Corporation's ("Liberty") contingent right to receive such shares as part
of USAi's merger with Home Shopping in 1996.
The Investment Agreement, as amended and restated as of December 18, 1997,
among USAi, Home Shopping, Universal and Liberty, a subsidiary of AT&T
Corporation (the "Investment Agreement"), relating to the Universal Transaction
also contemplated that, on or prior to June 30, 1998, USAi and Liberty would
complete a transaction involving a $300 million cash investment, plus an
interest factor, by Liberty in USAi through the purchase of Common Stock or LLC
Shares. The transaction closed on June 30, 1998 with Liberty making a cash
payment of $308.5 million in exchange for 15,000,000 LLC shares.
The following unaudited pro forma condensed combined financial information
for the six months ended June 30, 1998, is presented to show the results of the
Company, as if the Universal Transaction had occurred as of January 1, 1998. The
pro forma results include certain adjustments, including increased amortization
related to goodwill and other intangibles, changes in programming and film costs
amortization and an increase in interest expense, and are not necessarily
indicative of what the results would have been had the transactions actually
occurred on the aforementioned dates.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1998
----------------
(IN THOUSANDS)
<S> <C>
Net revenues......................................... $1,571,135
Net earnings......................................... $ 50,003
</TABLE>
7
<PAGE> 9
USANI LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE 4 -- CONSOLIDATED STATEMENTS OF CASH FLOWS
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS FOR THE SIX MONTHS ENDED
JUNE 30, 1999:
During the six months ended June 30, 1999, the Company acquired
post-production equipment through a capital lease totaling $2.1 million.
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS FOR THE SIX MONTHS ENDED
JUNE 30, 1998:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
(In thousands)
<S> <C>
ACQUISITION OF USA NETWORKS AND STUDIOS USA
Acquisition price.................................... $ 4,115,531
Less: Amount paid in cash............................ (1,300,983)
-----------
Total Non-Cash Consideration......................... $ 2,814,548
===========
Components of Non-Cash Consideration:
Deferred purchase price liability.................... $ 300,000
Issuance of Common Shares and Class B Shares......... 277,898
Issuance of USANi LLC Shares......................... 2,236,650
-----------
$ 2,814,548
===========
Exchange of Minority Interest in USANi LLC for Deferred
Purchase Price Liability.............................. $ 199,576
===========
</TABLE>
During the six months ended June 30, 1998, the Company acquired computer
equipment through a capital lease totaling $15.5 million.
NOTE 5 -- INVENTORIES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
JUNE 30, DECEMBER 31,
1999 1998
--------------------- ---------------------
INVENTORIES CONSIST OF: CURRENT NONCURRENT CURRENT NONCURRENT
- ------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Film costs:
Released, less amortization............... $ 78,241 $ 55,307 $ 98,082 $ 61,310
In process and unreleased................. 3,159 -- 138 --
Programming costs, net of amortization...... 125,141 84,802 151,192 88,983
Merchandise held for sale................... 158,198 -- 162,315 --
Other....................................... 501 -- -- --
-------- -------- -------- --------
Total............................. $365,240 $140,109 $411,727 $150,293
======== ======== ======== ========
</TABLE>
The Company estimates that approximately 90% of unamortized film costs at
June 30, 1999 will be amortized within the next three years.
NOTE 6 -- PROGRAM RIGHTS AND FILM COSTS
As of June 30, 1999, the liability for program rights, representing future
payments to be made under program contract agreements amounted to $460.6
million. Annual payments required are $99.9 million in 1999, $140.9 million in
2000, $80.6 million in 2001, $52.4 million in 2002, $36.6 million in 2003 and
$50.2 million in 2004 and thereafter. Amounts representing interest are $35.1
million and the present value of future payments is $425.5 million.
8
<PAGE> 10
USANI LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE 6 -- PROGRAM RIGHTS AND FILM COSTS -- (CONTINUED)
As of June 30, 1999, the liability for film costs amounted to $132.6
million. Annual payments are $45.6 million in 1999 and $87.0 million in 2000.
Unrecorded commitments for program rights consist of programs for which the
license period has not yet begun or the program is not yet available to air. As
of June 30, 1999, the unrecorded commitments amounted to $774.7 million. Annual
commitments are $35.2 million for the remainder of 1999, $128.3 million in 2000,
$166.2 million in 2001, $150.3 million in 2002, $105.6 million in 2003 and
$189.1 million in 2004 and thereafter.
NOTE 7 -- INVESTMENTS
During the three and six months ended June 30, 1999, the Company recognized
gains of $3.0 million and $50.3 million, respectively, from the sale of
securities in a publicly traded entity.
In March 1999, the Company entered into a series of financial instruments
to hedge the value of the Company's investment in securities of a publicly
traded entity. This hedge establishes a floor and ceiling for the value of these
securities and is intended to minimize the impact of market fluctuations until
the Company sells these securities. The hedge instruments expire during the
third quarter of 1999. The Company intends to sell the securities during the
third quarter of 1999. Based on the closing price of the underlying securities,
the fair value of the hedge as of June 30, 1999 reflects a loss of $11.7
million, which is offset by the unrealized gain on the fair value of the
security from the date the hedge transaction was entered.
NOTE 8 -- NOTES OFFERING AND GUARANTEES
On November 23, 1998, the Company issued $500.0 million 6 3/4% Senior
Notes due 2005 (the "Notes" and "Notes Offering") with USAi, as joint and
several co-obligors. The Notes are jointly and severally guaranteed by
substantially all subsidiaries of the Company and certain wholly and non-wholly
owned subsidiaries of USAi, including Home Shopping.
Full financial statements of the Guarantors have not been included because,
pursuant to their respective guarantees, the Guarantors are jointly and
severally liable with respect to the Notes. Management does not believe that the
information contained in full financial statements of the Guarantors would be
material to investors. See the USAi June 30, 1999 consolidated financial
statements filed on Form 10-Q for summarized statements setting forth certain
financial information concerning Guarantor and Non-Guarantor Subsidiaries.
NOTE 9 -- INDUSTRY SEGMENTS
For the three and six months ended June 30, 1999 and 1998, the Company
operated principally in three industry segments: Networks and television
production, Electronic retailing and Internet services. The Networks and
television production segment consists of the cable networks USA Network and The
Sci-Fi Channel and Studios USA, which produces and distributes television
programming, which were acquired on February 12, 1998. The Electronic retailing
segment consists of Home Shopping Network and America's Store, which are
9
<PAGE> 11
USANI LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE 9 -- INDUSTRY SEGMENTS -- (CONTINUED)
engaged in the sale of merchandise through electronic retailing. The Internet
services segment represents the Company's on-line retailing network business.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- ----------------------
1999 1998 1999 1998
-------- -------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenue
Networks and television production.......... $316,612 $309,841 $ 648,365 $476,003
Electronic retailing........................ 285,122 266,224 560,905 508,420
Internet services........................... 6,544 4,720 12,851 8,533
Other....................................... 2,836 3,627 6,882 6,815
-------- -------- ---------- --------
$611,114 $584,412 $1,229,003 $999,771
======== ======== ========== ========
Operating profit (loss)
Networks and television production.......... $ 77,154 $ 57,317 $ 157,869 $ 85,189
Electronic retailing........................ 19,144 17,346 33,552 25,405
Internet services........................... (11,755) (3,778) (19,000) (6,388)
Other....................................... (8,093) (4,130) (14,128) (6,595)
-------- -------- ---------- --------
$ 76,450 $ 66,755 $ 158,293 $ 97,611
======== ======== ========== ========
</TABLE>
10
<PAGE> 12
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
USANi LLC (the "Company" or "LLC") is a holding company, the subsidiaries
of which are engaged in diversified media and electronic commerce businesses.
EBITDA
Earnings before interest, income taxes, depreciation and amortization
("EBITDA") is defined as operating profit plus depreciation and amortization.
EBITDA is presented here as a management tool and as a valuation methodology for
companies in the media, entertainment and communications industries. EBITDA does
not purport to represent cash provided by operating activities. EBITDA should
not be considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles.
THIS REPORT INCLUDES FORWARD-LOOKING STATEMENTS RELATING TO SUCH MATTERS AS
ANTICIPATED FINANCIAL PERFORMANCE, BUSINESS PROSPECTS, NEW DEVELOPMENTS, NEW
MERCHANDISING STRATEGIES AND SIMILAR MATTERS. A VARIETY OF FACTORS COULD CAUSE
THE COMPANY'S ACTUAL RESULTS AND EXPERIENCE TO DIFFER MATERIALLY FROM THE
ANTICIPATED RESULTS OR OTHER EXPECTATIONS EXPRESSED IN THE COMPANY'S
FORWARD-LOOKING STATEMENTS. THE RISKS AND UNCERTAINTIES THAT MAY AFFECT THE
OPERATIONS, PERFORMANCE, DEVELOPMENT AND RESULTS OF THE COMPANY'S BUSINESS
INCLUDE, BUT ARE NOT LIMITED TO, THE FOLLOWING: MATERIAL ADVERSE CHANGES IN
ECONOMIC CONDITIONS IN THE MARKETS SERVED BY THE COMPANY; FUTURE REGULATORY
ACTIONS AND CONDITIONS IN THE COMPANY'S OPERATING AREAS; COMPETITION FROM
OTHERS; SUCCESSFUL INTEGRATION OF THE COMPANY'S DIVISIONS' MANAGEMENT
STRUCTURES; PRODUCT DEMAND AND MARKET ACCEPTANCE; THE ABILITY TO PROTECT
PROPRIETARY INFORMATION AND TECHNOLOGY OR TO OBTAIN NECESSARY LICENSES ON
COMMERCIALLY REASONABLE TERMS; AND OBTAINING AND RETAINING KEY EXECUTIVES AND
EMPLOYEES.
TRANSACTIONS AFFECTING THE COMPARABILITY OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
The Universal Transaction in February 1998 caused a significant increase in
net revenues, operating costs and expenses and operating profit. To enhance
comparability, the discussion of consolidated results of operations is
supplemented, where appropriate, with separate pro forma financial information
that gives effect to the Universal Transaction as if it had occurred as of
January 1, 1998. The pro forma information is not necessarily indicative of the
revenues and cost of revenues that would have actually been reported had the
Universal Transaction occurred as of January 1, 1998, nor is it necessarily
indicative of future results.
A. CONSOLIDATED RESULTS OF OPERATIONS
The following discussions present the material changes in the consolidated
results of operations of the Company for the quarter and six months ended June
30, 1999, compared with the quarter and six months ended June 30, 1998. The
operations for the quarter and six months ended June 30, 1998, consist of the
operations of Home Shopping and, since February 12, 1998, the results of USA
Networks and Studios USA. Reference should also be made to the unaudited
Condensed Consolidated Financial Statements included herein.
QUARTER AND SIX MONTHS ENDED JUNE 30, 1999 VS. QUARTER AND SIX MONTHS ENDED
JUNE 30, 1998
The Universal Transaction resulted in significant increases in net
revenues, operating costs and expenses, other income (expense) for the six
months ended June 30, 1999 when compared to 1998.
NET REVENUES
For the quarter ended June 30, 1999, revenues increased $26.7 million
compared to 1998 primarily due to increases of $18.9 million and $6.8 million
from the Electronic retailing and Networks and television production businesses,
respectively.
11
<PAGE> 13
For the six months ended June 30, 1999, revenues increased $229.2 million
compared to 1998 primarily due to increases of $172.4 million from the Networks
and television production businesses and $52.5 million from the Electronic
retailing business.
OPERATING COSTS AND EXPENSES
For the quarter ended June 30, 1999, total operating costs and expenses
increased $17.0 million compared to 1998 primarily due to increased costs of
$17.1 million and $9.8 million from the Electronic retailing and Internet
services businesses, respectively, offset by lower costs of the Networks and
television production business.
For the six months ended June 30, 1999, total operating costs and expenses
increased $168.6 million compared to 1998 primarily due to increased costs of
$99.7 million associated with including the operations of USA Networks and
Studios USA for the full period in 1999 and increased costs of $44.3 million and
$16.9 million from the Electronic retailing and Internet services businesses,
respectively.
OTHER INCOME (EXPENSE), NET
For the quarter and six months ended June 30, 1999, interest expense, net
decreased $20.0 million and $26.5 million, respectively, compared to 1998
primarily due to lower borrowing levels as a result of the repayment of bank
debt from proceeds of equity transactions involving Universal and Liberty during
1998 and lower interest rates.
For the quarter ended June 30, 1999, other, net totaled $8.0 million of
expense compared to $7.0 million of expense in 1998. For the six months ended
June 30, 1999, other, net totaled $1.7 million in income compared to $12.7
million of expense in 1998 primarily due to the reversal of equity losses in the
quarter ended March 31, 1999 which were previously recorded as a result of the
Universal Transaction.
MINORITY INTEREST
For the quarter and six months ended June 30, 1999 and June 30, 1998,
minority interest represents third parties' ownership interest in certain
foreign subsidiaries.
PRO FORMA QUARTER AND SIX MONTHS ENDED JUNE 30, 1999 VS. PRO FORMA QUARTER AND
SIX MONTHS ENDED JUNE 30, 1998
The following unaudited pro forma operating results of the Company presents
combined results of operations as if the Universal Transaction had occurred on
January 1, 1998.
The Unaudited Combined Condensed Pro Forma Statements of Operations are
presented for illustrative purposes only and are not necessarily indicative of
the results of operations that would have actually been reported had the
Universal transaction occurred as of January 1, 1998, nor are they necessarily
indicative of future results of operations.
12
<PAGE> 14
UNAUDITED COMBINED CONDENSED PRO FORMA STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- ------------------------
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
NET REVENUES:
Networks and television production......... $316,612 $309,841 $ 648,365 $ 633,367
Electronic retailing....................... 285,122 266,224 560,905 508,420
Internet services.......................... 6,544 4,720 12,851 8,533
Other...................................... 2,836 3,627 6,882 6,815
-------- -------- ---------- ----------
Total net revenues................. 611,114 584,412 1,229,003 1,157,135
Operating costs and expenses:
Cost of sales.............................. 182,586 167,300 358,672 319,580
Program costs.............................. 149,280 167,661 319,347 345,482
Selling and marketing...................... 73,107 69,636 135,738 141,754
General and administrative................. 57,760 44,323 113,796 87,463
Other operating costs...................... 22,190 23,125 44,319 45,521
Amortization of cable distribution fees.... 6,186 4,954 12,276 10,564
Depreciation and amortization.............. 43,555 40,658 86,562 82,025
-------- -------- ---------- ----------
Total operating costs and
expenses......................... 534,664 517,657 1,070,710 1,032,389
-------- -------- ---------- ----------
Operating profit........................ $ 76,450 $ 66,755 $ 158,293 $ 124,746
======== ======== ========== ==========
EBITDA....................................... $126,191 $112,367 $ 257,131 $ 217,335
======== ======== ========== ==========
</TABLE>
For the quarter ended June 30, 1999, pro forma revenues for the Company
increased $26.7 million, or 4.6%, to $611.1 million from $584.4 million compared
to pro forma 1998. For the quarter ended June 30, 1999, pro forma cost of
revenues and other costs, excluding depreciation and amortization, increased
$12.9 million, or 2.7%, to $484.9 million from $472.0 million compared to pro
forma 1998.
For the six months ended June 30, 1999, pro forma revenues for the Company
increased $71.9 million, or 6.2%, to $1.23 billion from $1.16 billion compared
to pro forma 1998. For the six months ended June 30, 1999, pro forma cost of
revenues and other costs, excluding depreciation and amortization, increased
$32.1 million, or 3.4%, to $971.9 million from $939.8 million compared to pro
forma 1998.
For the quarter ended June 30, 1999, pro forma EBITDA increased $13.8
million, or 12.3%, to $126.2 million from $112.4 million compared to pro forma
1998. For the six months ended June 30, 1999, pro forma EBITDA increased $39.8
million, or 18.3%, to $257.1 million from $217.3 million compared to pro forma
1998.
The following discussion provides an analysis of the aforementioned increases in
pro forma revenues and costs of revenues and other costs, excluding depreciation
and amortization, by significant business segment.
Networks and television production
Net revenues for the quarter ended June 30, 1999 increased by $6.8 million,
or 2.2%, to $316.6 million from $309.8 million compared to 1998. The increase
primarily resulted from an increase in advertising revenues due to higher
ratings at USA Network and a significant increase in advertising revenues and
affiliate revenues due to higher ratings and an increase in subscribers of The
Sci-Fi Channel. The increases were partially offset by lower revenue at Studios
USA due to fewer deliveries of network product, fewer pilots produced and
increased usage of internally produced series for which revenue recognition is
deferred until aired on USA Network and The Sci-Fi Channel.
Net revenues for the six months ended June 30, 1999 increased by $15.0
million, or 2.4%, to $648.4 million from $633.4 million compared to 1998. The
increase primarily resulted from an increase in advertising revenues
13
<PAGE> 15
and affiliate revenues at USA Network and The Sci-Fi Channel due to higher
ratings and subscribers partially offset by fewer deliveries of network product,
fewer pilots produced and an increased usage of internally produced series for
which revenue recognition is deferred until aired on USA Network and The Sci-Fi
Channel.
Cost of revenues and other costs for the quarter ended June 30, 1999
decreased by $14.3 million, or 6.4%, to $211.1 million from $225.4 million. The
decrease resulted primarily from lower overhead and marketing costs in both the
networks and the television production business, lower television production and
higher usage of internally produced product, partially offset by higher
programming costs at The Sci-Fi Channel.
Cost of revenues and other costs for the six months ended June 30, 1999
decreased by $31.1 million, or 6.7%, to $433.9 million from $465.0 million. The
decrease resulted primarily from lower overhead and marketing costs, lower
television production and increased usage of internally produced product.
EBITDA for the quarter ended June 30, 1999 increased $21.1 million, or
25.0%, to $105.5 million from $84.4 million compared to pro forma 1998. EBITDA
for the six months ended June 30, 1999 increased $46.1 million, or 27.4%, to
$214.5 million from $168.4 million compared to pro forma 1998.
Electronic retailing
Net revenues for the quarter ended June 30, 1999 increased by $18.9
million, or 7.1%, to $285.1 million from $266.2 million compared to 1998. The
increase resulted from higher revenues on both the Home Shopping Network and
America's Store services, higher continuity (or off-air) sales and higher
revenues on Home Shopping en Espanol, which was launched on March 30, 1998. The
increases were partially offset by a planned decrease in the mail order
business.
Net revenues for the six months ended June 30, 1999 increased by $52.5
million, or 10.3%, to $560.9 million from $508.4 million compared to 1998. The
increase resulted from higher revenues on both the Home Shopping Network and
America's Store services, higher continuity (or off-air) sales, higher revenues
on Home Shopping en Espanol and revenues from Short Shopping which began in
September 1998. The increases were partially offset by a planned decrease in the
mail order business.
Cost of revenues and other costs for the quarter ended June 30, 1999
increased by $14.8 million, or 6.4%, to $245.7 million from $230.9 million. This
increase resulted primarily from higher sales (gross margin decreased to 38.8%
in 1999 compared to 39.4% in 1998) and higher merchandising personnel costs.
Also contributing to the increase in costs was cost of sales of Home Shopping en
Espanol and costs associated with developing the Company's Short Shopping
concept.
Cost of revenues and other costs for the six months ended June 30, 1999
increased by $39.4 million, or 8.8%, to $487.1 million from $447.7 million. This
increase resulted primarily from higher sales (gross margin decreased to 38.8%
in 1999 compared to 39.3% in 1998) and higher merchandising personnel costs.
Also contributing to the increase in costs was cost of sales of Home Shopping en
Espanol and costs associated with developing the Company's Short Shopping
concept.
EBITDA for the quarter ended June 30, 1999 increased $4.1 million, or
11.5%, to $39.4 million from $35.3 million compared to 1998. EBITDA for the six
months ended June 30, 1999 increased $13.0 million, or 21.4%, to $73.8 million
from $60.8 million compared to 1998.
Internet services
Net revenues for the quarter ended June 30, 1999 increased by $1.8 million,
or 38.6%, to $6.5 million from $4.7 million compared to pro forma 1998. The
increase resulted from an increase in registered users to USAi's primary online
retailing service, First Auction, which was partially offset by the shut down of
another service during 1998.
Net revenues for the six months ended June 30, 1999 increased by $4.3
million, or 50.6%, to $12.8 million from $8.5 million compared to pro forma
1998. The increase resulted from an increase in registered users to USAi's
primary online retailing service, First Auction, which was partially offset by
the shut down of another service during 1998.
Cost of revenues and other costs for the quarter ended June 30, 1999
increased by $9.7 million, or 118.5%, to $17.8 million from $8.1 million
compared to pro forma 1998. The increase resulted primarily from increased costs
to maintain and enhance the Internet services, the costs incurred to develop a
new electronic commerce site
14
<PAGE> 16
to be launched in the third quarter of 1999, increased costs of shipping
products as First Auction expanded its product mix and increased advertising and
promotion costs.
Cost of revenues and other costs for the six months ended June 30, 1999
increased by $16.7 million, or 117.2%, to $30.9 million from $14.2 million
compared to pro forma 1998. The increase resulted primarily from increased costs
to maintain and enhance the Internet services and increased advertising and
promotion costs. An increased loss is expected for the remainder of 1999 as new
sites are rolled out.
EBITDA loss for the quarter ended June 30, 1999 increased $7.8 million, to
$11.2 million from $3.4 million compared to pro forma 1998. EBITDA loss for the
six months ended June 30, 1999 increased $12.4 million, to $18.1 million from
$5.7 million compared to pro forma 1998.
Other
Other includes the actual results from a business which was sold in the
second quarter of 1999. Costs are related to these revenues and corporate
expenses.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
The operating results and capital resources and liquidity requirements of
USAi, Home Shopping Network, Inc. ("Holdco") and USANi LLC are dependent on each
other. The investment agreement, among Universal Studios, Inc. ("Universal"),
Liberty Media Corporation, a subsidiary of AT&T Corporation, ("Liberty"), USAi
and Holdco requires that no less frequently than monthly, (1) all cash generated
by entities not owned by USANi LLC be transferred to USANi LLC and (2) any cash
needs by entities not owned by USANi LLC be funded by USANi LLC. In addition,
USAi and USANi LLC are jointly and severally obligated under the notes.
Net cash provided by operating activities was $194.3 million for the six
months ended June 30, 1999 compared to $114.9 million for the six months ended
June 30, 1998. These cash proceeds were used to pay for capital expenditures of
$28.9 million, to make long-term investments totaling $12.2 million, to make
principal payments on long-term obligations of $13.9 million, to make mandatory
tax distribution payments to LLC partners of $52.8 million, including $23.9
million to USAi, and to provide funding to USAi. USANi LLC generated cash
proceeds of $61.1 million from the sale of securities in a publicly traded
entity during the six months ended June 30, 1999.
Under the investment agreement, transfers of cash between USAi and USANi
LLC are evidenced by a demand note and accrue interest at USANi LLC's borrowing
rate under the existing credit agreement. Certain transfers of funds between
Holdco, USANi LLC and USAi are not evidenced by a demand note and do not accrue
interest, primarily relating to the establishment of the operations of USANi LLC
and capital contributions from USAi into USANi LLC. During the six months ended
June 30, 1999, net transfers from USANi LLC to USAi totaling approximately
$359.1 million, including $357.5 million related to the Hotel Reservations
Network Transaction and the October Films/ PFE Transaction, $26.3 million to
fund the operations of USAi's television broadcast operations and $14.7 million
to repay a portion of the outstanding borrowings assumed in the October Films/
PFE Transaction. Funds were also transferred to USAi to purchase shares of
treasury stock. These amounts were offset by $47.0 million of funds transferred
to USANi LLC from the Ticketing operations business.
On February 12, 1998, USAi and USANi LLC, as borrower, entered into the
credit agreement which provides for a $1.6 billion credit facility. The credit
facility was used to finance the Universal transaction and to refinance USAi's
then-existing $275.0 million revolving credit facility. The credit facility
consists of (1) a $600.0 million revolving credit facility with a $40.0 million
sub-limit for letters of credit, (2) a $750.0 million Tranche A Term Loan and,
(3) a $250.0 million Tranche B Term Loan. On August 5, 1998, USANi LLC
permanently repaid the Tranche B Term Loan in the amount of $250.0 million from
cash on hand. The revolving credit facility and the Tranche A Term Loan mature
on December 31, 2002.
On November 23, 1998, USAi and USANi LLC completed an offering of $500.0
million 6 3/4% Senior Notes due 2005 (the "Notes"). Proceeds received from the
sale of the Notes together with available cash were used to repay and
permanently reduce $500.0 million of the Tranche A Term Loan. The existing
credit facility is guaranteed by substantially all of USAi's material
subsidiaries. The interest rate on borrowings under the existing
15
<PAGE> 17
credit facility is tied to an alternate base rate or the London InterBank Rate,
in each case, plus an applicable margin. As of June 30, 1999 and as of July 31,
1999, there was $237.5 million in outstanding borrowings under the Tranche A
Term Loan, no borrowings under the revolving credit portion of the credit
facility, and $599.1 million was available for borrowing after taking into
account outstanding letters of credit. As of June 30, 1999, the interest rate on
loans outstanding under the Tranche A Term Loan was 5.79%.
Under the investment agreement relating to the Universal transaction, USAi
has granted to Universal and Liberty preemptive rights with respect to future
issuances of USAi's common stock and Class B common stock. These preemptive
rights generally allow Universal and Liberty the right to maintain an ownership
percentage in USAi equal to the ownership percentage that entity held, on a
fully converted basis, immediately prior to the issuance. In July 1999,
Universal and Liberty exercised their preemptive rights, resulting in total cash
proceeds to the company of $362.6 million. Universal purchased 7.4 million of
USANi LLC shares and Liberty purchased 3.6 million shares of USAi Common Stock.
As part of the Universal transaction, USAi entered into a joint venture
agreement relating to the development of international general entertainment
television channels including international versions of USA Network, The Sci-Fi
Channel and Universal's action/adventure channel, 13th Street. USAi has elected
to have Universal buy out its 50% interest in the venture. Accordingly, during
the quarter ended March 31, 1999 USANi LLC reversed amounts previously recorded
for its share of losses of the joint venture.
USAi anticipates that it will need to invest working capital towards the
development and expansion of its overall operations. Due primarily to the
expansion of the Internet business future capital expenditures are projected to
be higher than current amounts.
On March 1, 1999, the Company made a mandatory tax distribution payment to
the LLC partners in the amount of $52.8 million, including $23.9 million to
USAi. Under the terms of the investment agreement, USAi loaned that amount back
to USANi LLC.
In management's opinion, available cash, internally generated funds and
available borrowings will provide sufficient capital resources to meet the
Company's foreseeable needs.
OTHER MATTERS
The Company is currently working to resolve the potential impact of the
year 2000 on the processing of date-sensitive information by its computerized
information systems.
Although assessment of non-critical systems is an ongoing process, the
Company has substantially completed its detailed assessment of all of its
information technology and non-information technology hardware and software to
assess the scope of its year 2000 issue. The Company has potential exposure in
technological operations within the sole control of its technological operations
which are dependent in some way on one or more third parties. The Company
believes that it has identified all significant technological areas within its
control. The Company has ongoing communications with significant vendors and
customers to confirm their plans to become Year 2000 compliant and is assessing
any possible risk to or effects on its operations.
The Company believes that, with respect to technological operations which
are dependent on third parties, the significant areas of potential risk are the
ability of satellite and cable operators to receive the signal transmission of
USA Network, The Sci-Fi Channel and the Home Shopping Network and America's
Store services, and the ability of banks and credit card processors to process
credit card transactions. Remediation of critical systems that are not Year 2000
compliant is nearly complete. The Company expects its Year 2000 assessment,
remediation, implementation and testing to be completed by September 1999 except
for some of its non-critical systems which are scheduled to be completed by
October 1999.
It is not possible at this time to predict with any reasonable certainty
the total cost to address all Year 2000 issues. However, the Company believes
that the total costs associated with the Year 2000 assessment, remediation,
implementation and testing will not exceed $10 million of which approximately $6
million has been spent through July 31, 1999. This amount is exclusive of
capital expenditures that have either been made or are currently planned to be
made to replace existing hardware and software systems, all as part of its
ongoing efforts to upgrade its infrastructure and systems.
16
<PAGE> 18
Accordingly, based on existing information, the Company believes that the
costs of addressing potential problems will not have a material adverse effect
on its financial position, results of operations or cash flows. However, if the
Company, its customers or vendors were unable to resolve the issues in a timely
manner, it could result in a material adverse effect on its financial position,
results of operations or cash flows. The Company plans to devote the necessary
resources to resolve all significant year 2000 issues in a timely manner.
During the second quarter of 1999, the Company developed contingency plans
in the event it does not successfully complete all phases of its Year 2000
program for each of its significant operating divisions.
SEASONALITY
The Company's businesses are subject to the effects of seasonality.
Networks and television production revenues are influenced by advertiser
demand and the seasonal nature of programming, and generally peak in the spring
and fall.
The Company believes seasonality impacts its Electronic retailing segment
but not to the same extent it impacts the retail industry in general.
17
<PAGE> 19
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the Urban Broadcasting litigation, previously reported in the Company's
Quarterly Report on From 10-Q for the fiscal quarter ended March 31, 1999, on
May 17, 1999 Urban filed a Notice of Appeal with the court to appeal the Final
Order of Judgment entered in the at-law action to the Virginia Supreme Court. On
June 11, 1999, the Chancery Court entered a Final Order of Decree of Judgment in
favor of Home Shopping Club LP ("HSC"), USA Networks, Inc. and USA Station Group
of Virginia, Inc., which expressly declared that HSC had not breached the
Television Affiliation Agreement between HSC and Urban. On June 11, 1999, Urban
filed a Notice of Appeal with the court to appeal the Final Order of Decree of
Judgment entered in the Chancery action to the Virginia Supreme Court.
The Company is engaged in various other lawsuits either as plaintiff or
defendant. In the opinion of management, the ultimate outcome of these various
lawsuits should not have a material impact on the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <C> <S>
27.1 -- Financial Data Schedule (for SEC use only)
27.2 -- Financial Data Schedule (for SEC use only)
</TABLE>
(b) Reports on Form 8-K.
None.
18
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
USANi LLC
--------------------------------------
(Registrant)
<TABLE>
<C> <S>
Dated August 16, 1999 /s/ BARRY DILLER
---------------------------------------- --------------------------------------------------------
Barry Diller
Chairman of the Board and
Chief Executive Officer
Dated August 16, 1999 /s/ VICTOR A. KAUFMAN
---------------------------------------- --------------------------------------------------------
Victor A. Kaufman
Office of the Chairman,
Chief Financial Officer
(Principal Financial Officer)
Dated August 16, 1999 /s/ MICHAEL P. DURNEY
---------------------------------------- --------------------------------------------------------
Michael P. Durney
Vice President, Controller
(Chief Accounting Officer)
</TABLE>
19
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 13,658
<SECURITIES> 0
<RECEIVABLES> 324,448
<ALLOWANCES> 0
<INVENTORY> 365,240
<CURRENT-ASSETS> 770,476
<PP&E> 170,917
<DEPRECIATION> 59,508
<TOTAL-ASSETS> 7,073,230
<CURRENT-LIABILITIES> 681,505
<BONDS> 497,077
0
0
<COMMON> 0
<OTHER-SE> 5,291,705
<TOTAL-LIABILITY-AND-EQUITY> 7,073,230
<SALES> 611,114
<TOTAL-REVENUES> 611,114
<CGS> 331,866
<TOTAL-COSTS> 331,866
<OTHER-EXPENSES> 202,798
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,533
<INCOME-PRETAX> 59,929
<INCOME-TAX> 1,255
<INCOME-CONTINUING> 58,865
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,865
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 13,658
<SECURITIES> 0
<RECEIVABLES> 324,448
<ALLOWANCES> 0
<INVENTORY> 365,240
<CURRENT-ASSETS> 770,476
<PP&E> 170,917
<DEPRECIATION> 59,508
<TOTAL-ASSETS> 7,073,230
<CURRENT-LIABILITIES> 681,505
<BONDS> 497,077
0
0
<COMMON> 0
<OTHER-SE> 5,291,705
<TOTAL-LIABILITY-AND-EQUITY> 7,073,230
<SALES> 1,229,003
<TOTAL-REVENUES> 1,229,003
<CGS> 678,019
<TOTAL-COSTS> 678,019
<OTHER-EXPENSES> 392,691
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,296
<INCOME-PRETAX> 188,925
<INCOME-TAX> 3,138
<INCOME-CONTINUING> 186,164
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 186,164
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
